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When a key employee decides to leave your business, the aftermath can often be stressful. This is accentuated ex-employees try to poach other employees from your company. Unfortunately, this is not an uncommon scenario. Perhaps your ex-employee decides to set up a competing business and wants to take your staff with them, or they join a new company and are encouraging their old work friends to join them. Fortunately, there are some preventative measures and responses you can use in these scenarios. This article will outline preventative and responsive measures to employee poaching.
Preventative Measures
Implement Restraint of Trade Clauses
The best way to protect your business from ex-employees poaching your staff is by ensuring that your employment agreements all contain restraint of trade clauses. You may need to rely on these restraint of trade clauses to enforce the employment agreement in case your ex-employees poach or threaten to poach your other employees.
A well-drafted restraint of trade clause should include a non-solicitation clause. This will restrain employees from ‘enticing away’ clients or employees from your business.
Remember, restraint of trade clauses are only enforceable if they are reasonably necessary to protect your legitimate business interests.
The enforceability of these clauses depends on a number of factors, such as:
- the seniority of the ex-employee who is poaching your staff;
- the importance of the poached employees to your business; and
- whether the employees being poached wish to leave your business out of their own volition.
Remind Employees of Their Post-Employment Obligations
When you respond to a letter of resignation or send an employee a termination letter, you should take the opportunity to remind the employee of their post-employment obligations, including in relation to non-solicitation of your other employees.
Furthermore, an exit interview with an employee who is leaving the company will help you get feedback on your workplace culture and is also a great space to remind employees of their post-employment obligations. Therefore, you can ensure that employees are reminded of the restraint of trade clauses in their contracts and the consequences of breaching them.
As an employer, it is essential to understand what employment laws have changed and their implications for your business — particularly the changes to the Fair Work Act 2009 through the new Closing the Loopholes legislation.
Enforcement Measures
Act Quickly When a Breach Occurs
If you become aware that one of your former staff members has poached another one of your employees or they are threatening to do so, you should ensure that you act quickly.
The Court will consider how long it took your business to respond to the breach when deciding whether to enforce a restraint of trade clause.
Consider Sending Correspondence to Your Ex-Employee
If you discover that your ex-employee is trying to solicit your other staff members, you can consider sending them a letter stating that:
- they have breached their post-employment obligations; or
- you are reminding them of these obligations.
A similar letter can also be sent to their new employer to put them on notice of these obligations.
These types of letters often require the ex-employee to sign an undertaking (a legal promise) stating that they will stop breaching their post-employment restraints. If the ex-employee signs these undertakings, you will be in a good position to enforce them in Court should the ex-employee continue to breach their obligations.
Assess Whether Court Is a Feasible Option
You can also consider going to court to enforce a restraint of trade clause. However, you should first try to resolve the matter via the above-mentioned correspondence. Before going to court, you should also seek legal advice to determine whether it will be worth it in the circumstances. Restraint of trade clauses are often difficult and costly to enforce.
In deciding whether to enforce the restraint of trade clause, the court will consider whether the clause is reasonably necessary to protect your legitimate business interests. Previous cases have established that the court will consider the:
- severity of the restrictions, and
- time limits that you seek to impose.
You will be investing a lot of money into going to court to enforce a restraint clause. Therefore, it is worthwhile considering whether the loss is detrimental enough and whether you have a chance of winning.
Try to Obtain an Injunction
Typically, the goal of enforcing a restraint of trade clause is to stop the employee from poaching.
An injunction will stop employees from poaching staff; however, the restraint does not last forever. If your company has suffered a loss, you may be entitled to claim compensation. However, keep in mind that the court is relatively narrow when determining the enforceability of these clauses.
Continue reading this article below the formKey Takeaways
It is common for employees to make connections and friendships with their coworkers. Therefore, including restraint of trade clauses in your employment agreements can help to mitigate the risk of ex-employees poaching. If you are faced with the unfortunate scenario of poaching, you have options to prevent this conduct. Taking certain enforcement actions can bear some risks depending on the circumstances. It is best to discuss your matter with an experienced employment lawyer before proceeding.
If you need assistance in drafting your employment contracts or deciding whether to pursue an action against ex-employees for trying to poach other employees, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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